Cheap Gold Nearing Its End, Cheap Money Growing Greater

Source: Seeking Alpha (6/5/07)

Now replaced by Dollars, Euros, Sterling, Yen and Swiss Francs in the global marketplace, however, gold still retains its ability to freeze wealth for the future. For only physical gold bullion remains in limited supply.

According to the official CPI index, the US Dollar has lost more than seven-eighths of its purchasing power over the last 60 years. One British Pound today will buy you what four pennies bought in 1947.

Perhaps it's no coincidence that the death of money as a store of value has come alongside the end of gold as money as well. Now replaced by Dollars, Euros, Sterling, Yen and Swiss Francs in the global marketplace, however, gold still retains its ability to freeze wealth for the future. For only physical gold bullion remains in limited supply.

No one can abuse gold's rarity, creating it at will by clicking a mouse or promising a fresh loan. Mining production slipped 2% in 2006 according to new research from Virtual Metals. Its latest Yellow Book, sponsored by Fortis, agrees with the GFMS consultancy's data. It also forecasts that full-year mining output in 2007 will shrink further, sitting more than 5% below the level of 2002.

The supply of cheap money, in contrast, only grows stronger each day. The broad supply of Euros (M3) is now growing at its fastest pace since spring 1983. Here in London, bankers are lending money to private equity firms at less than official interest rates, just so they can join the private-equity bubble.